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Competitors and Substitutes

The study Hot Drinks in Norway provides the following state of hot beverage market in Norway: The two Norwegian producers of coffee, Kaffehuset Friele AS and Joh Johannson Kaffe AS accounted for almost 50% of value sales of hot drinks in 2007. The multinational Nestle Norge AS was in third place, with 15% of sales in value terms. The first tea player, Haugen-Gruppen A/S, was fourth in 2007, accounting for 7% of all value sales in hot drinks. These market players are characterized by being innovative and responding to consumer demand; showing this by launching products which reflect the current trends in the market.

Haugen-Gruppen has tried to bring in different flavours of tea, with tastes from different parts of the world. The producers show how innovative and inventive they are so that they remain attractive to consumers and maintain their positive sales. (n. p) This article provides that Norwegian is generally more of a tea-drinking population. Thus, Starbucks will have to confront the same challenge they faced in China where most people opt to drink tea. Timely, Starbucks acknowledged this and included tea in their list of products.

On the other hand, industrial and small-scale brewing is a popular tradition in

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Norway. This may be considered as a threat but Starbucks is a highly differentiated product from alcoholic beverages. It does not even prove to be a significant threat to the coffee industry. E. Price Using the FXConverter, 1. 50 US Dollar (USD) is equivalent to 10. 64736 Norweigan Kroner (NOK) as of 10 December 2008. In Norway, a coffee in a cafe would generally cost between 10 to 20 NOK (NUCC, 2004).

Based on these data, the price of Starbucks coffee in the US falls within the normal price range of coffee in Norway thus minimizing the risk of price difference in the international market. The following were identified by Sandhusen (2000) as effective global pricing strategies that Starbucks may adopt in Norway: 1. Marginal cost pricing – disregards fixed costs for making and marketing products when pricing these products for global markets, assuming these costs have already been captured in the domestic market.

Thus, the base produce price is the marginal cost of producing and marketing it for export, a strategy that can often effectively offset price escalation. 2. Market hold pricing – is a demand-based pricing strategy designed to hold a company’s share of market in the face of unfavorable exchange rates. In the early 1980s, for example, when the dollar appreciated against most other currencies, American companies based prices on the competitive situation in each market and the ability of customers to pay rather than on U. S. prices translated into foreign currencies at current exchange rates.

3. Optional pricing – decisions can also offer practical legal benefits in global markets. For example, by including as part of an automobile accessory a tool that had previously been sold separately, the manufacturer bypasses the relatively high tariff on that tool and acquires immunity from antidumping regulations by making the product no longer comparable to competing goods in the target market. (p 426)

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